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OBSESSION FOR INITIAL COIN OFFERING BY VENTURE CAPITALISTS AND ITS RISKS3 min read

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As defined here what initial coin offering is and how it differs from initial public offering in its traditional sense and as regards revenue or a stake in a particular company. Initial coin offering is a big deal presently as over $2 billion token sales recorded in about 140 ICO this year alone, experts and other major financial houses are of the opinion that initial coin offering is rather merely a flash in the pan and likely to burst anytime a new trend emerges in cryptocurrency.

 

Emma Channing of The Argon Group explains that initial coin offerings seem to be everywhere, that minimum of two company launch daily since it started; during a presale, token buyer may contact a seller for a transaction which is later carried out on a website portal and that requires identity check. He said the rate at which Silicon Valley is obsessed with cryptocurrency has never been seen before and this has overtaken both angel and seed investing in a single year. Channing helps companies carry out initial coin offering said she has not seen quite anything like this new technology trend. According to her, figures around $4 billion will be raised through initial coin offerings in this year alone but argued that very small fraction number of companies that have “blockchain technology as their heartbeat”. Most ICOs that fails obviously missed that edge or their message and marketing is poor because attention and buzz around initial coin offering mask the reality that it’s actually a hard way to raise fund for startup.

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Initial coin offering and risks
Initial coin offering obsession and risks around it.

 

RISKS AROUND INITIAL COIN OFFERING (ICO)
Venture capitalists are risk averse and only few can stake everything on an ICO, investors derive their power based on collected facts and their superior judgment, they select project that is worthwhile, fund it; if they perceive a startup isn’t promising or the figures do not add up, they fold and the startup is left to raise cash through crowdfunding or raise money by themselves. Startup owners are as well wary of handing over control of their new business to investors knowing that what an investor cares for above all else is there return on investment and see initial coin offering as a more viable option than splitting stakes in their newly launch company with a venture capitalist.

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GOVERNMENT STAND ON INITIAL COIN OFFERING (ICO)
The United States for example, SEC (security exchange commission) normally require a private firm to file disclosure agreement whenever they raise money privately. Initially, less attention was paid to initial coin offering market and this allows it to develop with no regulations; lately, the SEC has started to warn startups that they are likely to be violating securities laws with the token sales.

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Government herself have not found a way around regulating these digital currency trends, and this is a big question for government to proffer solution. Internal Revenue SERVICE (IRS) said virtual currencies are taxable as long as these tokens can be converted to a dollar amount. SEC is expected to begin a stringent clampdown on initial coin offerings before cash is raised for it, China is a perfect example of this as they have banned this practice. Initial coin offering may be hosted in a particular country, they are not restricted to that place alone as they can be traded anywhere a user gets plugged to the internet.

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